PHILADELPHIA -- Amid preparations for Monday's commencement exercises, University of Pennsylvania officials spent much of yesterday dealing with the racial tension that has plagued the campus over the last semester.

The university's Judicial Inquiry Office held a closed hearing yesterday to determine whether a white student who had called some black students "water buffalo" had violated the university's policy forbidding racial harassment. The policy prohibits racial epithets meant to "inflict direct injury" on people.

The inquiry office will decide within 10 days whether it will dismiss the case or schedule it for a full-blown evidentiary hearing later this year.

Lawyers at the American Civil Liberties Union here say the case should have been dismissed, and they vowed to take the case to federal court if the university penalized the white student.

That student, Eden Jacobowitz, said earlier this week that he had intended no racial slur when he shouted at several black sorority women who were making noise outside his dormitory window.

Mr. Jacobowitz, who was born in Israel and speaks Hebrew, said "water buffalo" was a translation of a Hebrew word, behayma, which is used as a mild epithet to chide an uncouth individual.

This incident, and a more recent one in which black students threw out almost the entire press run of the student newspaper )) because they did not like a columnist's conservative opinions, may not have been as dramatic as the racial unrest on some other college campuses this year.

But the university's handling of the incident has drawn a chorus of criticism and ridicule from civil libertarians and columnists, who say the university's effort to regulate speech is a prime example of an overzealous attempt to be politically correct.

The case is drawing attention partly because Sheldon Hackney, the president of the university, is President Clinton's nominee to head the National Endowment for the Humanities.

University officials said yesterday that Mr. Hackney, who has been an outspoken advocate of free speech when controversial figures such as Louis Farrakhan or Robert Mapplethorpe appeared on campus or displayed their works, would not discuss the "water buffalo" case while his confirmation hearings were pending.

Criticism of the university revolves around two issues: the university's effort to police free speech and the apparent disparity in the university's response in disciplining black students and white students.

Civil libertarians say the university should not try to restrict speech but should try to educate students when they use racial slurs.

The second criticism is that university officials appear to have a double standard in disciplining minority students involved in racial incidents. For at the same time as the university is bringing disciplinary charges against Mr. Jacobowitz, it has taken no action against a group of black students who destroyed 14,000 copies of the student newspaper because they objected to the opinions of a student columnist, Gregory Pavlik, a junior from Delran, N.J., who used his column to attack racial preferences, the Rev. Martin Luther King Jr. and what he saw as the university's favored treatment of blacks in admissions and disciplinary procedures.

Last month, Mr. Hackney issued a statement about the black students' actions. "Two important university values now stand in conflict," he said. "There can be no compromise regarding the First Amendment right of an independent publication to express whatever views it chooses. At the same time, there can be no ignoring the pain that expression may cause."

The university is continuing its investigation of whether the students violated the freedom of expression by trashing the newspapers.

Several columnists have criticized Mr. Hackney for what they say is a double standard. George F. Will wrote in an April 29 column, "Hackney's institution has a propensity for behavior both cowardly and bullying, trimming principles to pander to political fashion."

A May 7 Toronto Star article, under the headline, "Exactly What Race Is a Water Buffalo?" called the incident "egregiously absurd," noting that water buffalo were not found in Africa, but only in Southeast Asia.

Black leaders of campus groups were reluctant to discuss the Jacobowitz case yesterday. Over the past few months, though, some black students have said the important points were the women's perception of "water buffalo" as a racial epithet and a generally inhospitable climate for minority students at the school.

Mr. Jacobowitz, 18, a freshman from Lawrence, N.Y., gave his account of the incident yesterday.

Mr. Jacobowitz, who has a room in the sixth floor of High Rise North residence hall, said that it began around midnight, Jan. 13, when about a dozen black sorority women began "shouting, stomping, singing and screaming things like 'Woo, woo.' "